Comments and forex-analytics from FBS Brokerage Company

[FBS.com Official]

Commerzbank: short-term outlook for EUR/USD

 

The European currency didn’t manage to overcome resistance at 1.3860 and went down to 1.3740.

 

Technical analysts at Commerzbank claim that as long as the pair EUR/USD is trading above support at 1.3650, it’s under the bullish pressure. The bank sets the target for euro’s growth at 1.3960/1.4000 where there is the 78.6% retracement of the decline from November maximum and the 200-week MA.

 

On the other hand, if euro breaks below support at 1.3650, it will be poised to fall to the 55-day MA at 1.3450.

 

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Traders expect RBNZ to cut benchmark rate

 

New Zealand’s dollar fell today to this year’s minimum versus its US counterpart as the country’s Prime Minister John Key claimed that the potential reduction of the 3% benchmark interest rate will help the economy recover after earthquake in Christchurch that occurred on February 22. According to Key, the two quakes from which New Zealand suffered during the past half of the year caused NZ$20 billion ($14.8 billion) of damage.

 

Credit Suisse Group AG index based on swaps shows that traders are sure that the Reserve Bank of New Zealand will cut the rates by 25 basis points at its meeting on March 10. Some investors are even looking forward to 50-basis point reduction.

 

Although the government is separate from the central bank, such statements made by the Prime Minister certainly affect the national currency.

 

The market is currently trying to find out where the bottom is going to be. Support is found at 0.7400, while the resistance lies at 0.7439.

 

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Euro’s under pressure versus franc and yen

Analysts at Zuercher Kantonalbank note that after falling through the key support at 1.2890 the pair EUR/CHF is trapped between 1.27 and 1.30. The specialists warn that if euro falls below 1.2685, it will be poised down to 1.2550.

 

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Mizuho: USD/CHF will fall to 0.8300

 

Analysts at Mizuho Corporate Bank claim that 8-month downtrend for the pair USD/CHF that has recently pushed the greenback to the record minimum at 0.9235 isn’t over yet. The specialists believe that US dollar will fall versus Swiss franc to 0.9100 next month, lowering to 0.8500 in 6 months and hitting the 0.8300 level in a year.

 

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RBC: King won’t manage to prevent the rate hike

 

Analysts at RBC Capital Markets say that the fact that British pound reached yesterday 13-month maximum versus the greenback means that investors believe that the Bank of England Governor Mervyn King won’t be able to keep interest rates from rising.

 

The head of the Britain’s central bank is cautious about raising interest rates as it may hamper already weak country’s economic growth – in the fourth quarter of 2010 UK GDP contracted by 0.6%. However, the number of BoE Monetary policy Committee members in favor of the rate hike increases.

 

According to the minutes of the MPC meeting that took place on February 10, BoE Chief Economist Spencer Dale joined policy makers Andrew Sentance and Martin Weale in voting for an interest-rate hike from the current 0.5% level as British inflation pace accelerated in January to 4%, 2 times higher than the target level.

 

RBC specialists underline that since 2003 King has been outvoted already twice. As sterling’s strengthening the market becomes more convinced that King will either be offside again or capitulate.

 

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Commerzbank: comments on NZD/USD

 

During the Asian session today New Zealand’s dollar extended its previous decline from 0.7555 slumping below 0.7400.

 

Technical analysts at Commerzbank believe that the pair NZD/USD will stabilize right above 0.7376/43. According to the specialists, kiwi will bottom in the area of December minimum at 0.7343 and then struggle next week to crawl up to 0.7555.

 

If New Zealand’s currency falls below 0.7343, it may decline to June maximum at 0.7161 and to 61.8% Fibonacci retracement of the 2010 advance at 0.7102.

 

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[FBS.com Official]

Mizuho: USD/JPY will move to the triangle’s lower border

 

Analysts at Mizuho Trust and Banking believe that US February Non-Farm payrolls data due at 13:30 GMT is likely to have a limited impact on the pair USD/JPY. The specialists expect that the greenback will keep trading between 81 and 83 yen for some time.

 

The strategists note that the Federal Reserve has a long way ahead until it decides to end the monetary stimulus measures and tighten policy. As a result, the yield rate differential between the United States and Japan won’t widen enough to support investors’ demand for US currency.

 

Technical analysts at Mizuho Corporate Bank note that the pair USD/JPY has suddenly bounced to the middle of the narrowing “triangle” formation but was constrained by the moving averages that are now going down below the small daily Ichimoku Cloud. In case of the weekly close below 81.30, bearish momentum for dollar will increase.

 

According to Mizuho, it’s necessary to sell US currency at 82.45 stopping above 82.70 and targeting 81.60.

 

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[FBS.com Official]

Largest asset managers on US dollar’s rate

 

Analysts at BlackRock and Pacific Investment Management Company, the world’s biggest bond-management firms, give opposite outlooks for US currency.

 

BlackRock specialists favor US dollar against euro noting that the sovereign-debt crisis in the euro area will cause volatility in the region, while the European banks are in need of capital. In their view, the tensions in the Middle East will continue escalating. Political turmoil that hit Tunisia only 2 months ago, while now it has already enveloped such countries as Oman, Bahrain and Libya.

 

BlackRock strategists say that any disruptions in Saudi Arabia could propel the oil price to $150 per barrel in the near term. During the past week Saudi Arabia’s benchmark stock index dropped by 15%. Global equities risk slumping and investors may soon turn to the greenback as a safe haven, while American bond yields will climb by 4%.

 

Analysts at Pimco, on the other hand, advised investors to avoid dollars and expect US Treasury yields to decline.

 

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[FBS.com Official]

Strong Aussie creates risks for the country’s economy

 

Australia’s Prime Minister Julia Gillard claimed that country’s economy is too dependent on commodities exports, while the domestic spending level remains relatively low. As a result, Australia is vulnerable in the current situation of commodity boom.

 

Australia’s dollar, the world’s fifth-most traded currency, added 12% versus the greenback in 2010. The pair AUD/USD driven by rising revenues from shipments of coal and iron ore to China has reached in December the $1.0256 level, maximum since it became floated in 1983. Strong Aussie affects Australian manufacturing and tourism industries.

 

It’s necessary to note that unlike the emerging countries from Brazil to China, Australian authorities refrained from steps to stem currency gains, such as through limits on capital inflows letting the market determine Aussie’s rate. So, the nation’s government doesn’t consider the possibility of conducting interventions to weaken Aussie’s rate.

 

Analysts at National Australia Bank believe that the performance of Australia’s economy may be weaker than expected. In their view, there’s a risk of the Dutch disease effect when the commodities industry grows driving up the national currency and hurting manufacturing as it happened in the Netherlands in 1970s.

 

Analysts at TD Securities claim that the performance of Australian dollar was practically unaffected by the Trichet’s comments, New Zealand’s earthquake and the oil crisis. The specialists, however, note that the pair AUD/USD will get chance to reach the post-float maximum at 1.0253 only if the RBA signals the rate hike while the central bank indicated no such intention this week. The mentioned level will act as a resistance for now.

 

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[FBS.com Official]

Rabobank: EUR/USD 3-month forecast lifted

 

Analysts at Rabobank increased 3-month forecast for the pair EUR/USD from 1.40 to 1.42 after the European Central Bank President Jean-Claude Trichet claimed yesterday that the central bank may raise the interest rates next month. The specialists still think that the single currency will trade at 1.52 in a year.

 

According to Rabobank, although the market was expecting hawkish comments from the EBC, the analysts got taken by surprise by such degree of hawkishness.

 

The pair EUR/USD added 4.3% since the beginning of this year. The pace of euro’s advance was high despite the fact that the euro zone’s debt crisis is far from over.

 

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[FBS.com Official]

Money market news: interest rates expectations

 

Money market rates show that the European Central Bank will increase borrowing costs in July the latest.

 

According to forward contracts on Eonia (euro overnight index average), investors speculating that the ECB will raise its main refinancing rate from 1% by 25 basis points by its July meeting, note the economists at Deutsche Bank AG. The bets were brought forward after yesterday’s ECB statement.

 

The European Central Bank President Jean-Claude Trichet claimed that inflation risks had moved to the “upside” and that it may be necessary to lift up borrowing costs already in April.

 

The 2-year German note yield added 23 basis points, while Euribor (3-month euro interbank offered rate) rose today to 20-month maximum.

 

According to forward rates on Sonia (sterling overnight interbank average), the Bank of England policy makers is likely to start hiking one month earlier than the ECB and increase the 0.5% borrowing costs to 1% by October.

[FBS.com Official]

Morgan Stanley raised euro forecast versus major currencies

 

Currency strategists at Morgan Stanley have once again revised upwards their forecast for the pair EUR/USD as they expect the European Central Bank to lift up interest rates in 2011 and 2012. The first rate hike in almost 3 years may be conducted as soon as in April as inflationary pressure in the euro area escalates.

 

The specialists increased projection of euro’s rate by the end of this year from $1.24 to $1.45. Morgan Stanley also raised the year-end forecast for the pair EUR/JPY from 115 to 122 yen, for the pair EUR/CHF – from 1.24 to 1.35 francs and for the pair EUR/GBP – from 78 to 90 pence.

 

According to the analysts, the ECB will increase interest rates by 25 basis points 3 times this year and 3 times in 2012.

 

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[FBS.com Official]

Commerzbank: EUR/USD will advance to 1.4535

 

Technical analysts at Commerzbank note that as the European currency has broken above 1.4010 trading versus US dollar, it will be able to climb to 1.4318 and 1.4535 levels representing the resistance line drawn from the 2008 peak, a long-term double Fibonacci level and the 1995 maximum.

 

According to the specialists, bullish pressure on the pair EUR/USD will ease only if it falls below 1.3717.

 

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[FBS.com Official]

ING: buy EUR/JPY

 

Analysts at ING Commercial Bank claim that the single currency may rise next week to 1.42 trading versus US dollar. As a result, the specialists have increased their short-term targets for the pair EUR/USD. In their view, euro will rise to 1.45 during the next 1-3 months. The forecast for the end of 2011 was left unchanged at 1.48.

 

The bank notes that the most efficient way to gain on euro’s strength is to trade EUR/JPY as the ECB seems ready to start monetary tightening in the coming months, while the Bank of Japan may keep rates at the record minimum during the next 2 years. According to ING, EUR/JPY is likely to break above 115-116 and advance to 120 yen per euro.

 

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[FBS.com Official]

Forecast Pte: euro will resume growth after consolidation

 

The single currency reached yesterday maximum since November 8 at 1.4035 trading versus the greenback, but then eased retreating to the 1.3975 area. Technical analysts at Forecast Pte claim that after a brief consolidation the pair EUR/USD may continue its way up to 4-month maximum at 1.4282 set on November 4. In their view, the uptrend is still quite firm. Last week euro gained 1.7% and since the beginning of this year it added 4.3%.

 

The specialists say that daily, weekly and monthly euro charts remain positive, although short-term momentum indicators such as the RSI show that the currency may be approaching “overbought” levels. The European currency will keep rising after a pause as EUR/USD managed to close last week major resistance at the 1.3974 level that’s found on the downtrend line connecting December 3, 2009, maximum of $1.5141 and November 4, 2010, maximum at $1.4282.

 

Euro’s MACD also indicates a further advance. According to Bloomberg data, the MACD was 0.0112 today, above the signal line of 0.0091. Euro’s 14-day RSI was at 66.8 today from 59.3 a week ago, approaching the level of 70 that suggests a currency is about to change direction.

 

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[FBS.com Official]

JPMorgan: recommendations on major currencies

 

Analysts at JPMorgan claim that the rising energy prices have driven a wedge between the central banks that target headline inflation and those which prefer watching core inflation.

 

As a result, the bank recommends buying the European currency, though very selectively (versus Japanese yen, for example) trying to make out how much ECB tightening is already priced in its rate. The bank advises to stay long on currencies that appreciate due to the economic strength (Swiss franc) and remain short on those currencies where the economies cannot validate overblown monetary expectations (British pound).

 

JPMorgan also favors Canadian dollar versus its Australian and American counterparts.

[FBS.com Official]

CBI on the BoE rates

 

Economists at Confederation of British Industry believe that the Bank of England may start slowly and steadily increasing interest rates in the second quarter as the rising inflation is worrying the country’s population. The specialists, however, think that the rates will remain rather low. According to CBI, some of the factors behind the accelerating inflation are global, so it’s not that clear whether the rate hikes will be efficient enough.

 

In January annual inflation rate in the UK climbed to 4% rising 2 times higher than the BoE target.

 

Economists surveyed by Bloomberg News project that the BoE Monetary Policy Committee will leave the benchmark interest rate at 0.5% on March 10 meeting. It’s also expected that Britain’s monetary authorities will keep their bond-purchase plan at 200 billion pounds ($326 billion).

[FBS.com Official]

BNY Mellon: EUR/USD may reverse downwards

 

Analysts at Bank of New York Mellon claim that the European currency may start losing versus the greenback due to the euro zone’s debt problems. In their view, there will soon be a tipping point for sentiment about the peripheral euro-zone debt and, consequently, for euro.

 

According to Bloomberg, Portuguese 10-year bond yields rose today to maximal level. The country sold securities at borrowing costs almost 50% higher than at a September auction. Portugal is trying to convince investors that it can avoid applying for financial help to the EU and the IMF like Greece and Ireland did. Portuguese authorities raise taxes and conduct the deepest spending cuts in more than 3 decades selling debt to cover its fiscal deficit.

 

European leaders will meet tomorrow to discuss the ways to solve the debt crisis. The EU summit will take place on March 24-25 and will surely have strong impact at the market.

 

The pair EUR/USD has climbed this year by 4% on the expectations that the European Central Bank will raise interest rates to counter accelerating inflation. The single currency didn’t manage to hold last week above 1.40 and retreated getting below February 2 maximum at 1.3860.

 

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RBC: euro's decline won't be as strong as expected

 

Currency strategists at Royal Bank of Canada raised their quarter outlook for the pair EUR/USD as the ECB President Jean-Claude Trichet claimed last week that the central bank may increase its benchmark interest rate in April.

 

While earlier the specialists thought that in the second quarter euro may fall to $1.30, they now speak about the rate’s lowering to $1.36. So, RBC still expects the single currency to decline, though not as strongly as it was forecasted before. The economists underline that the periphery issues have not gone away. RBC projects that euro will drop to $1.30 by the end of the year. The estimate is up from the previous forecast of $1.22.

 

According to the bank, euro zone monetary authorities will lift up interest rates by 25 basis points in each of the next four quarters. Concerns about the debt crisis, however, will finally overshadow the effect from monetary tightening.

 

Yesterday the cost of insuring against a default of Greek debt reached the record maximum as the EU prepares to approve a package of measures counter the dent crisis at its summit on March 24-25 in order to calm bond markets.

 

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[FBS.com Official]

BNP Paribas: euro’s decline is a correction

 

Analysts at BNP Paribas claim that bearish pressure on the European currency may increase in the short-term as the Moody's Investors Service reduced Spain’s credit rating to Aa2.

 

The specialists note that the major trend line support at 1.3775 holds since the beginning of this year. If the pair EUR/USD breached this level, it will be poised to fall to 1.3710.

 

However, the bank regards the current euro’s decline as a correction of its 2011 advance. BNP Paribas has even raised medium-term forecast for the European currency to 1.46.

 

Technical analysts at Commerzbank also say that as long as EUR/USD is trading above 20-day MA at 1.3753, it has all chances to return up to 1.40. Otherwise, below 1.3750 euro will target the 55-day MA at 1.3539.

 

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[FBS.com Official]

RBNZ reduced interest rates

 

The Reserve Bank of New Zealand reduced today its benchmark interest rate from 3% to the record minimum at 2.5% citing the economic damage of an earthquake in Christchurch that occurred on February 22.

 

As a result, the nation’s assets became less attractive for investors as other major central bank tend to contain inflation by raising borrowing costs. Economists surveyed by Bloomberg News expect rates are on hold until the first quarter next year.

 

The pair NZD/USD fell to minimum since October 1 at 0.7336. Analysts at TD Securities and Brown Brothers Harriman advise investors to be bearish on kiwi.

 

New Zealand’s dollar, the worst-performing G-10 currency, lost 5.7% this year and may fall further on the concerns that the nation will slide into recession and the prospect that Australia, Korea, the euro area and the UK will raise rates this year. The only thing to slow down the decline of New Zealand’s is RBNZ Governor Alan Bollard’s pledge that the rate cut will be reversed when post-earthquake construction begins to fuel economic growth.

 

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[FBS.com Official]

Bank of Japan adds liquidity to the markets

 

According to Bloomberg, the Bank of Japan added a total of 15 trillion yen ($183 billion) to the financial system today in three separate same-day emergency operations.

 

The BOJ also said it will offer to buy 3 trillion yen in Japanese government bonds with repurchase agreements in an operation that starts on March 16 and ends the next day. Moreover, the central bank pledged to add 3 trillion yen to the system from March 15 to March 22 and 800 billion from March 16 to June 10 through regular operations.

 

Yen firstly surged today to maximum since November 9 at 80.61 yen after stocks fell and on the concerns that domestic investors will buy the national currency to compensate the damage made by the earthquake. Strategists at UBS believe that the greenback will stay under pressure versus yen during the next few weeks due to the massive yen’s repatriation.

 

BOJ actions helped to lift the pair USD/JPY above the 82 yen level.

 

Analysts at Commerzbank claim that the bank will continue operations until the demand for yen significantly and the markets calm down.

 

Economists at Nomura say that the earthquake has increased the risk the economy won’t be able to start growing more rapidly, which many believed would happen this quarter.

 

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[FBS.com Official]

IFR Markets: USD/JPY will firstly fall and the rebound

 

Strategists at Thomson Reuters IFR Markets claim that yen’s repatriation is inevitable as companies rebuild their plans, insurance companies pay out and Japanese retail investors will also probably sell foreign currencies and buy into the rising risk aversion.

 

The specialists believe the pair USD/JPY will be poised to go down to the record minimum at 79.75 yen. In their view, there will be an intervention, at least verbal, if the rate gets down close to 80 yen or below this level, that may happen in the short term due to this knee-jerk reaction to the disaster we're seeing unfold in Japan.

 

In the longer term dollar’s rate may reverse up, says IFR Markets. Any spike down in USD/JPY should be used to buy the greenback in the medium term, as strong yen is against the interests of Japanese monetary authorities and they will intervene to prevent such outcome. IFR Markets expects that the Bank of Japan may continue monetizing debt buying government bonds (JGBs).

 

The economists also note that it’s important whether the attitude of the ratings agencies towards Japanese government bonds will change as Japan’s officials have significantly increased spending that means that the nation’s fiscal state is going to deteriorate.

 

The analysts also draw investors’ attention to the speculation that some of the companies in Japan that hold huge amounts of country’s papers may start selling JGBs considering foreign assets as safe haven. As a result, USD/JPY may firstly drop and then in several weeks make a strong advance.

 

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[FBS.com Official]

Outlook for Aussie from HSBC, NAB and CBA

 

Analysts at HSBC claim that the Reserve Bank of Australia won’t raise the benchmark interest rate from the current 4.75% level until June or August, while earlier they were looking forward to the rate hike in May. In their view, minutes of the RBA last meeting released tomorrow will show that the central bank is satisfied with current situation. In addition, weaker labor market data released so far suggests that Australia’s monetary authorities won’t hurry to lift up interest rates. According to HSBC, by the end of the year the rates will be raised by 50 basis points.

 

Strategists at National Australia Bank say that markets are adjusting their rate-hike expectations downwards. Investors’ sentiment about Aussie worsened due to the concerns that Japan’s economic situation may affect Australia in the next months.

 

Analysts at Commonwealth Bank of Australia expect the pair AUD/JPY to decline. In their view, this may happen mainly due to the strength of Japan’s currency than due to the weakness of Australia’s one. Yen will be pushed up by repatriation by Japanese insurance firms. According to CBA, the pair AUD/USD won’t be affected much unless there will be a threat to global economic growth outlook.

 

Australia’s dollar went down from $1.0158 to the $1.0090 area and hit minimum versus yen since January 31 at 81.43.

 

According to Credit Suisse AG index based on swaps, the RBA will boost its target rate by 17 basis points over the next 12 months, while a month ago the index showed 36 bps increases.

 

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Chart. H4 AUD/USD

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[FBS.com Official]

Commerzbank: comments on EUR/USD

 

The single currency rose from Friday’s minimum 1.3745 getting above 1.3950. Technical analysts at Commerzbank note that the pair EUR/USD found resistance at the 1.3978 level representing 78.6% Fibonacci retracement of the decline from November maximums to January minimums. In their view, it will be very difficult for euro to overcome this level and it will fail in the 1.3978/1.4038 area. In this case, the euro zone’s currency will drop to 61.8% Fibonacci retracement at 1.3739 on its way down to 1.3571/52.

 

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